FTC and DOJ finalize new HSR rules

On October 10, 2024, all five Federal Trade Commission (“FTC”) Commissioners, with concurrence from the Antitrust Division of the U.S. Department of Justice (“DOJ”),¹ approved the most significant changes to the Hart-Scott-Rodino (“HSR”) rules and merger notification forms² since the HSR process was created more than 45 years ago.  While the new rules have been markedly scaled back from the proposed rules in the agencies’ previously published notice of proposed rulemaking,³ future filers will face increased burdens to provide additional information with their HSR filing. These additional disclosures are intended to provide the FTC and DOJ (collectively, the “Antitrust Agencies”) greater insights into potential concerns from horizontal overlaps, nascent competition, vertical relationships, and Clayton Act Section 8 interlocking directorates earlier in the HSR process.⁴

The new rules (the “Final Rule”) and merger notification forms (“New HSR Form”) were published in the Federal Register on November 12, 2024 and go into effect on February 10, 2025 (the “Effective Date”⁵).  Note, however, that the last several administrations (including Presidents Obama, Trump, and Biden) have issued regulatory freezes⁶ that postpone the effective dates for rules that have been published in the Federal Register but that have not gone into effect by 60 days from the start of the new administration. This could mean that the Final Rule could be delayed even further beyond February 10, 2025.

This is the latest development in a years-long reinvigoration of the antitrust enforcement toolbox under the Biden administration.

This alert is organized into three main sections (and an appendix):

• Section 1: Key Takeaways
• Section 2: Notable Changes in the New HSR Form Compared to the Current HSR Form
• Section 3: Immediate and Long-Term Considerations for Clients with Active Deals
• Appendix: Notable Deviations between the Notice of Proposed Rulemaking (“NPRM”), initially announced on June 27, 2023,⁷ and the Final Rule

1. Key takeaways

New HSR form will be significantly more burdensome for most filers:

• Transacting parties subject to the HSR Act should expect a seismic change in the amount and type of upfront information and documents required to be submitted with the New HSR Form (as described in more detail below⁸). As a consequence, parties should anticipate significantly more time to prepare the New HSR Form, and greater potential avenues of inquiry by the Antitrust Agencies.

• As a technical matter, there is no “short” HSR form option like there is in other jurisdictions with significant filing requirements (e.g., the European Commission and Brazil). That said, the level of disclosure will differ based on whether the filer is an acquirer or acquired person, whether the transaction involves a horizontal overlap or vertical supply relationship, or whether the transaction qualifies under a new “select Section 801.30” transaction, as described in Section 2 below.⁹

• The Antitrust Agencies estimate that the New HSR Form will require an average of 68 additional hours per filing and note that the highest costs will be incurred by acquiring persons with overlapping products or services.¹⁰

Unanimously approved:

• The FTC Commissioners voted 5-0 across party lines to approve the New HSR Form and Final Rule, suggesting that the Final Rule will survive even if Republicans win the upcoming election.¹¹ Additionally, the unanimous vote and the reduced burdens (as compared to the NPRM) lowers both the risk the Final Rule is successfully challenged in court¹² and/or the risk the rule is overturned by Congress under the Congressional Review Act.¹³

Key proposals in NPRM walked back:

• While the New HSR Form will be more burdensome, many proposals in the NPRM were rejected or significantly modified, such as the elimination of the requirement to provide draft Item 4(c) and 4(d) documents,¹⁴ labor information, bespoke organizational charts, information on messaging systems, detailed information on minority investments, and certification on document retention. See Appendix.

Early termination to be reinstated:

• Upon the Effective Date, the current ban on granting early termination of the HSR waiting period, which has been in effect since February 2021,¹⁵ will be lifted. Therefore, in theory, some parties may again be able to close their transactions earlier than 30 days from the date of HSR filing (or for certain transactions, such as an all-cash tender offer, earlier than the 15-day waiting period).¹⁶

No change in HSR act waiting periods:

• Transactions will still be subject to a 30-calendar-day waiting period (or 15 calendar days in limited circumstances).¹⁷ That said, Chair Khan called on Congress to extend the 30-day waiting period, stating that the “statutory timelines laid out in the HSR Act have not kept pace with the surge in volume and complexity of transactions.”¹⁸

No changes to HSR act or rules regarding reportability and exemptions:

• The New HSR Form and Final Rule do not change any reportability thresholds, reportability rules, or exemptions.

No changes in filing fees:

• Nothing in the Final Rule affects the filing fees associated with making an HSR Act filing, which are mandated by Congress and adjusted annually by the FTC in line with the Consumer Price Index. As a reminder, in 2023, Congress revised the schedule of HSR filing fees, creating a new fee structure with six tiers, which increased fees for some transactions while reducing them for others. This resulted in significantly higher filing fees for transactions of approximately $1 billion and above.¹⁹

2. Notable changes in the new HSR form compared to the current HSR form

New narrative response requirements, including:

• Descriptions of any horizontal overlaps (either current or planned), including sales and customer information or relevant details and timelines pertaining to products under development;

• Descriptions of existing or potential vertical relationship(s) between the filing parties, including sales, purchases, and customer/supplier information, to be used to assess post-merger opportunities to foreclose rivals in vertical or diagonal relationship(s) to the acquiring person; and

• Descriptions of the strategic rationale for the transaction.

Expansion of document requests and production, including:

• Final²⁰ transaction-related documents (also referred to as Item 4(c) and 4(d) documents in the current HSR Form) created by or for one designated individual who has primary responsibility for supervising the strategic assessment of the deal, and who would not otherwise qualify as a director or officer (the “supervisory deal team lead”);²¹

• Certain ordinary course business documents shared with the CEO and/or Board that analyze markets, competitors, or competition relating to products in competition or potentially in competition (e.g., under development by a target); and

• While not an affirmative document disclosure requirement (as it had been in the NPRM), indication of whether an acquirer has any existing contractual agreements with the target (e.g., non-compete, non-solicit, licensing, and other types of agreements).²²

Additional disclosure about officers and directors, ownership structures (aimed at private equity), and prior acquisitions / roll-ups is required.

• Acquiring persons must disclose officers and directors (or those exercising similar functions for unincorporated entities)²³ within their organization who have responsibility for current or planned overlapping products or services and who also serve as an officer or director of another entity in the overlapping products or services. This disclosure is aimed at identifying potential violations under Section 8 of the Clayton Act on interlocking directorates.²⁴

• Funds and master limited partnerships must provide organizational charts showing relationships between entities that are affiliates or associates (to the extent they exist) and disclose certain limited partners who will have the ability to influence decision-making post-transaction.²⁵

• Target entities must disclose prior acquisitions for a five-year period that meet defined thresholds which mirror the existing prior acquisition disclosure requirement for buy-side filings.²⁶

Less stringent filing requirements for “select 801.30 transactions.”

The Final Rule introduces a new category of transactions “select 801.30 transactions,” which are transactions that do not result in the acquisition of control and fall within the parameters of 16 C.F.R. § 801.30, which principally applies to transactions without an agreement or contemplated agreement (e.g., open market purchase or tender offer). These transactions have “less complex internal structures” and accordingly will have less stringent filing requirements.²⁷

Changes to other disclosures, including:

• Foreign subsidies, per the requirements under the Merger Filing Fee Modernization Act of 2022;²⁸

• Defense or intelligence contracts;²⁹

• Ex-U.S. merger control filing status;³⁰ and

• Updated revenue by NAICS codes and removal of ten-digit North American Product System (“NAPCS”) code requirement.³¹

3. Immediate and long-term considerations for clients with active deals

Parties with active deals subject to the HSR Act should consider these (non-exhaustive) practical consequences of the New HSR Form and Final Rule.

Transactions where an HSR filing has already been submitted

Transactions where HSR filings have been submitted and parties are currently within the HSR Act waiting period are not subject to the Final Rule. Parties will, of course, need to wait until the expiration of their HSR Act waiting period to close.

If such parties are considering pulling and refiling their HSR Form, the typical approach and current HSR Form should be used (i.e., notifying the agency in writing of the intent to pull and refile, updating portions of the HSR Form, including the certification and affidavit and any additional transaction-related documents (known as Item 4(c) and 4(d) documents under the current HSR Form),³² and resubmitting it within two business days of the initial waiting period expiration date).

Transactions where an HSR filing will likely be submitted before the effective date of February 10, 2025 (subject to potential delay due to regulatory freeze)

For parties planning on submitting HSR filings between now and the Effective Date, the new rules will not apply retroactively, meaning parties do not have to submit a New HSR Form, even if the applicable HSR Act waiting period expires after the Effective Date. The key date to consider is the filing date relative to the Effective Date—whether a transaction closes after the Effective Date does not affect what form Parties should file on.

This will be an important consideration for transactions that are currently near to signing, or that could sign within the approximately three months before the Effective Date, because the burden and cost will significantly increase for parties filing a New HSR Form compared to the current HSR Form. Relatedly, parties may also want to consider filing on the basis of a letter of intent or term sheet if they believe signing will not take place until after the Effective Date.

Parties will also need to consider their strategy regarding pulling and refiling.³³ For example, parties that file before the Effective Date using the current HSR Form but whose waiting period will expire after the Effective Date will be required to refile using the New HSR Form, should they choose to refile. As mentioned above, the process for pulling and refiling HSR remains the same, meaning the New HSR Form would need to be completed and resubmitted within two business days of the expiration of the waiting period.

Transactions where an HSR filing will likely be submitted after the effective date of February 10, 2025 (subject to potential delay due to regulatory freeze)

Parties to transactions that will file HSR after the Effective Date should factor in the additional burden and time required to prepare the New HSR Form. Antitrust provisions in any transaction agreement should be drafted with a clear understanding of the implications of the Final Rule. Specifically, the typical 10-to-15-day HSR filing deadline will not be appropriate for the New HSR Form unless parties are able to devote significant time to preparing the filings before signing, which will take significantly longer to prepare, especially for first time filings and transactions involving overlaps. Parties should consider a deadline of “as soon as reasonably practicable” as a default position unless and until it becomes possible to more precisely gauge reasonable filing deadlines for a given transaction.³⁴

In deals where satisfaction of the HSR Act closing condition is the most significant closing condition, parties to transactions involving overlaps and/or vertical relationships (e.g., a customer or supplier relationship) should consider whether there is a need to extend their long stop date to account for the substantial increase in preparation time and, at a minimum, will likely want to consider preparing their HSR Form earlier in the negotiation and diligence process.

Conclusion

The Antitrust Agencies’ overhaul of the HSR Form follows increased investigations and enforcement. These sweeping changes will require significant additional information from filing parties and allow the Agencies to conduct a closer review during the initial waiting period. For these reasons, it is strongly recommended that antitrust specialists be consulted as early as possible in the transaction process to ensure that transactions subject to the new HSR Rules are managed as smoothly as possible.

Appendix: notable deviations between the NPRM and the final rule

Of the twenty-nine proposals outlined in the NPRM, ten were entirely rejected, seventeen were modified, and only two were included without modification. The Final Rule eliminated many of the most burdensome requirements contemplated in the NPRM, rejecting requirements to collect information from filers about labor markets, provide draft transaction-related documents, provide organizational charts, and create a timeline of the transaction. Below is a high-level overview of the key changes:

Labor market analysis:

• The NPRM would have required filers to provide a detailed labor market analysis, including classification of workforce categories, identification of geographic information associated with overlapping commuting zones and details on labor or workplace safety violations issued during the five-year period before the filing. The NPRM asserted that this information would be indicative of a concentrated labor market where workers cannot easily find another job. While this proposed requirement came amidst repeated efforts by the agencies to make harm in labor markets a key component of merger enforcement, it was ultimately rejected in the Final Rule.

Draft transaction-related documents:

• Under the NPRM, filers would have been required to submit draft versions of all transaction-related Item 4(c) and 4(d) documents that were provided to officers, directors, or the supervisory deal team lead instead of just final versions. The NPRM proposed to do this to allow staff to have documents that reflected business realities instead of “sanitized” versions. In rejecting this proposal, the Final Rule avoids imposing an extremely burdensome requirement on filing parties to identify and submit draft documents.

Bespoke organizational charts:

• The NPRM would have required organizational charts to be created for funds and master limited partnerships, as well as an organizational chart of authors and recipients of transaction documents. Under these proposals, most organizational charts would have to be created as part of the filing, and as explained in the NPRM, were designed to explain complex business structures. The Final Rule wholly rejects the requirement to create an organizational chart for authors and recipients of Item 4(c) and 4(d) documents and amends descriptions of entity structures for funds and MLPs to eliminate the requirement to create an organizational chart.

Transaction timeline:

• The NPRM conceived of requiring filing parties to produce a timeline of key dates for closing the proposed transaction. The proposal to create an estimated closing timeline was wholly rejected in the Final Rule, with the agencies citing commentators’ reservations about the additional delays and costs associated with a hypothetical timeline.

Information about ownership structure and minority limited partnerships:

• The NPRM proposed requiring additional information about the acquiring and acquired person, including a description of the ownership structure of the acquiring person and acquiring entity information about other types of interest holders that may exert influence over the acquiring person, and the identification of officers, directors, and board observers of the acquiring person and acquired entity. The Final Rule, notably, eliminates the requirement to identify other types of interest holders that may exert influence on the acquiring entity and entities related to it.

Information regarding prior acquisitions:

• The NPRM proposed significant changes to information requests for prior acquisitions. The proposed changes included: expanding the lookback period for reporting prior acquisitions from five years to ten years; eliminating the prior de minimis exception that required reporting only for prior acquisitions of greater than $10 million; requiring the acquired entity to also report prior acquisitions; and requiring that acquisitions of substantially all of the assets of a business be treated the same as acquisitions of securities or noncorporate interests. The Final Rule eliminates the first two proposed changes.

Document preservation and messaging systems:

• Amidst growing concerns by the agencies surrounding ephemeral messages, the NPRM would have required filing parties to provide information about steps taken to preserve documents or use of messaging systems, similar to what is required in a Second Request. The Final Rule eliminates this requirement entirely. 

 

Footnotes

1. DOJ Press Release, “Justice Department Concurs with Federal Trade Commission’s Changes to Premerger Notification Form Used in Merger Review” (October 10, 2024)
2.Technically, there will be two sets of instructions and forms: one for the acquired person and another for the acquiring person.
3. See our prior client alerts on this topic
4. Of note, the Final Rule does not introduce labor-related disclosure requirements, and such absence was a clear compromise amongst the FTC Commissioners, as evidenced in the Commissioner Statements, with Commissioner Holyoak noting a “chief” problem in the notice of proposed rulemaking “was its proposal to collect information from filers about labor markets,” while Commissioner Bedoya dedicated his Commissioner Statement on the importance of labor-related antitrust issues (“Rather than litigating the merits of the labor screen, I write to respond to one of the ideas underlying my colleagues’ arguments against it”). See “Statement of Commissioner Melissa Holyoak Final Premerger Notification and Report Form and the Hart-Scott-Rodino Rules,” Commission File No. P239300 (October 10, 2024), page 7; see also “Statement of Commissioner Alvaro M. Bedoya Joined by Chair Lina M. Khan and Commissioner Rebecca Kelly Slaughter Regarding Amendments to the Hart-Scott-Rodino Rules and Premerger Notification Form and Instructions,” Commission File No. P239300 (October 10, 2024), page 1.
5. Assuming no litigation challenging the Final Rule results in a preliminary injunction.
6. Memorandum for the Heads of Executive Department and Agencies, 74 Fed. Reg. 4435 (Jan. 20, 2009); Memorandum for the Heads of Executive Departments and Agencies; Regulatory Freeze Pending Review, 82 Fed. Reg. 8346 (Jan. 20, 2017); Memorandum for the Heads of executive Departments and Agencies, 86 Fed. Reg. 7424 (Jan. 20, 2021).
7. FTC Press Release, “FTC and DOJ Propose Changes to HSR Form for More Effective, Efficient Merger Review” (June 27, 2023)
8. Based on the survey responses, the FTC found that the average number of additional hours required to prepare an HSR filing with the changes outlined in the Final Rule is 68 hours, with an average low of 10 hours for select 801.30 transaction filings by the acquired person and an average high of 121 hours for filings from acquiring person in a transaction with overlaps or supply relationships. We consider this to be an underestimate.
9. See Final Rule (October 10, 2024), Figure 3, page 156
10. See Final Rule (October 10, 2024), footnote 273, page 128
11. At the time of the publication of the NPRM, the FTC Commissioners were solely comprised of three Democratic Commissioners and no Republican Commissioners. 
12. The changes to the Final Rule, and unanimous vote, may also represent a compromise that was aimed at either lowering the risk of litigation challenging the Final Rule by private plaintiffs or weakening the basis for such challenges. The bulk of the Commissioner Ferguson’s concurring statement involves a detailed analysis and defense of why the contribution of the Republicans transformed what had started as an “indefensible bureaucratic overreach” in the form of the original notice of proposed rulemaking in June 2023 to the Final Rule, which “satisfies the requirements of both the HSR and APA.” “Statement of Commissioner Andrew N Ferguson In the Matter of Amendments to the Premerger Notification and Report Form and Report Form and Instructions, and the Hart-Scott-Rodino Rule 16 C.F.R. Parts 801 and 803,” Commission File No. P239300 (October 10, 2024), pages 10-11
13. In addition to the possibility that the new rules will be challenged in federal court and enjoined, the rules are also subject to mandatory submission to Congress under the Congressional Review Act (“CRA”). The CRA, which was enacted in 1996, requires federal agencies to submit final rules to Congress and the Government Accountability Office prior to the rules taking effect. While the CRA has been seldom used to overturn final rules, successfully overturning only 20 rules in its history, it does trigger a period of 60 days during which Congress may use a disapproval procedure, which must take place within 60 session days before adjournment in either chamber. This deadline for the 118th Congress expired in May 2024, meaning the 60-day period for the new rules will commence with the 119th Congress in 2025.
14. Item 4(c) of the current HSR Form requires parties to include “all studies, surveys, analyses, and reports which were prepared by or for any officer(s) or director(s) (or, in the case of unincorporated entities, individuals exercising similar functions) for the purpose of evaluating or analyzing the acquisition with respect to market shares, competition, competitors, markets, potential for sales growth or expansion into product or geographic markets.” Item 4(d) documents all studies, surveys, analyses, and reports prepared by a third party for the purpose of evaluating or analyzing market shares, competition, competitors, markets, potential for sales growth, or expansion into product or geographic markets that specifically relate to the sale of the acquired entity(s) or assets. See HSR Form Instructions
15. FTC Press Release, “FTC, DOJ Temporarily Suspend Discretionary Practice of Early Termination” (February 4, 2023)
16. FTC Press Release, “FTC Finalizes Changes to Premerger Notification Form” (October 10, 2024), (“Following the final rule coming into full effect, the Commission will lift its temporary suspension on early termination of filings made under the Hart-Scott Rodino Act. Because the final rule will provide the agencies with additional information necessary to conduct antitrust assessments, the rule will help inform the processes and procedures used to grant early terminations.”)
17. The HSR waiting period is typically 30 calendar days after both parties have filed their respective notifications unless earlier terminated or otherwise extended by the issuance of a request for additional information or documentary material (a “Second Request”). If the waiting period would expire on a Saturday, Sunday, or legal public holiday (as defined in 5 U.S.C. 6103(a)), the waiting period is extended to 11:59 pm Eastern Time of the next regular business day. In the case of an all-cash tender offer or a bankruptcy transaction subject to 11 U.S.C. 363(b), the waiting period is 15 calendar days unless earlier terminated or otherwise extended.
18. Statement of Chair Lina M. Khan Joined by Commissioner Rebecca Kelly Slaughter and Commissioner Alvaro M. Bedoya Regarding The Final Premerger Notification Form and the Hart-Scott-Rodino Rules Commission File No. P239300 and Regarding the FY2023 HSR Annual Report to Congress Commission File No. P859910” (October 10, 2024), page 6
19. See Final Rule (October 10, 2024), Table 5, page 126
20. The FTC indicated that any transaction-related document that was shared with any member of the board of directors (or similar body, as opposed to the entire board as is its current position) does not qualify for the “draft” documents exception and must be produced.
21. A new term created to identify an individual who is not an officer or director but who has the primary responsibility for supervising the strategic assessment of the contemplated transaction. This individual need not have ultimate decision-making authority but will functionally lead the day-to-day process for the transaction. Note, the Item 4(c) and 4(d) requirement in the current HSR Form that captures documents prepared by or for officers or directors will also be carried over in the New HSR Form.
22. Includes current agreements and any prior agreements within one year of filing.
23. Includes any slated officers and directors of the target, post-closing, if applicable.
24. Notably, the Final Rule does not extend to board observers.
25. Such rights include the right to serve as, nominate, appoint, veto, or approve board members, or individuals with similar responsibilities, of any defined set of acquiring person entities, or of the general partner or management company of any of such acquiring person entities.
26. Such criteria includes listing only acquisitions of 50% or more of the voting securities of an issuer, 50% or more of non-corporate interests of an unincorporated entity, or all or substantially all the assets of an operating business if the entity or business had annual net sales or total assets greater than $10 million in the year prior to the acquisition and any acquisitions of assets that did not constitute all or substantially all of an operating business valued at or above the statutory size-of-transaction test at the time of their acquisition.
27. “Select 801.30 transactions” need not provide transaction rationale, a transaction diagram, plans and reports, overlaps descriptions, supply relationships descriptions, and/or defense and intelligence contracts.
28. The New HSR Form implements the requirement to report information about foreign subsidies. Filers must account for any subsidies from foreign entities or governments of concern within the two years prior to submitting their filing and provide a brief description of the relevant subsidy.
29. This is a new section of the New HSR Form that requires filers to identify proposals and awarded procurement contracts with the U.S. Department of Defense, or any member of the U.S. intelligence community, valued at $100 million or more that are or will be the source of revenues in any identified NAICS code overlap or that involve or will involve overlapping products or services.
30. Parties must disclose whether any ex-U.S. merger control filings are required, and if so, the timeline for such filings. The New HSR Form also allows filers to voluntarily grant waivers for ex-U.S. competition authorities and State attorneys general to share information disclosed in connection with the New HSR Form.
31. On financial information reporting, the Final Rule adopted two changes that reduce the burden for filers: the elimination of the use of ten-digit NAPCS codes for revenue associated with manufacturing and the removal of the requirements that filing parties provide the precise amounts of revenue attributable to each NAICS code. Instead of the precise figures, the New HSR Form has four revenue ranges and requires that parties organize their responses by operating business(es).
32. For completeness, under the New HSR Form and rules (specifically 16 C.F.R. Section 803.12(c)(1)(iii)), the Acquirer will also need to update Transaction-Specific Agreements and Subsidies from Foreign Entities of Concern.
33. See 16 C.F.R. § 803.12.
34. Notably, the FTC found that on average 68 additional hours would be required to prepare the new HSR filing, with an average low of 10 hours and high of 121 hours for filings from acquiring person in a transaction with overlaps or supply relationships, although that number is likely a significant underestimate and will vary by filer. See, Final Rule, pages 379-80. The FTC Premerger Notification Office had previously estimated that the new requirements would add on average 107 additional hours of additional time to preparing the HSR Form. We understood the prior estimate to be low and continue to believe the FTC’s projections underestimate the additional hours of preparation that will be required.